Item 1.01 Entry into a Material Definitive Agreement.
Amendment to Option, License and Collaboration Agreement
On November 17, 2021, Arcus Biosciences, Inc. ("Arcus") entered into an
amendment to its Option, License and Collaboration Agreement with Gilead
Sciences, Inc. ("Gilead") dated May 27, 2020 (the "Collaboration Agreement").
Pursuant to the amendment, Gilead exercised its options to three Arcus
programs-its anti-TIGIT program (including domvanalimab and AB308), adenosine
receptor antagonist program (including etrumadenant) and CD73 program (including
quemliclustat). This transaction is subject to review under the
Hart-Scott-Rodino Antitrust Improvements Act. Upon closing, Gilead will pay
Arcus an aggregate of $725 million in option fees for its option exercise with
respect to these three programs. Thereafter, in accordance with the terms of the
Collaboration Agreement, as amended for these three programs, the companies will
co-develop, equally share global development costs and equally share all profits
and losses for the United States, subject to certain expense caps on Arcus's
spending and true-up adjustments. Gilead will obtain rights to exclusively
commercialize these optioned programs outside of the U.S., subject to the rights
of Arcus's existing collaboration partners to any territories, and Gilead will
pay to Arcus tiered royalties as a percentage of revenues ranging from the
mid-teens to the low twenties.
In addition, the parties agreed to collaborate on discovery and early
development of drug candidates against two novel research targets ("research
programs") for which Arcus will lead performance of discovery and early
development activities. With respect to these two research programs, Gilead has
the right to exercise its option, on a program-by-program basis, upon Arcus's
completion of certain IND-enabling activities for an option payment of $60
million. If the option is exercised by Gilead at this stage, the collaboration
terms for optioned programs will be applicable to each research program except,
with respect to commercialization outside of the U.S., Gilead would pay to Arcus
tiered royalties as a percentage of revenues ranging from high single digits to
low double digits. If Gilead declines to exercise its option at this stage,
Gilead maintains an option, on a program-by-program basis, which must be
exercised prior to the expiration of a prescribed period following the
achievement of a development milestone in such program and Arcus's delivery to
Gilead of the requisite data package. If the option is exercised by Gilead at
this later stage, the collaboration terms for optioned programs will be
applicable to the joint development program including that, with respect to
commercialization outside of the U.S., Gilead would pay to Arcus tiered
royalties as a percentage of revenues ranging from the high-teens to the low
twenties.
In connection with Gilead's exercise of its options to three Arcus programs, the
parties agreed to amend the $100 million option continuation payment due on the
second anniversary of the Collaboration Agreement (the "2022 Continuation
Payment"). Upon closing for all three programs, Gilead will no longer be
obligated to make the 2022 Continuation Payment. In the event closing only
occurs for one program, the 2022 Continuation Payment will be reduced to $67
million. In the event closing only occurs for two programs, the 2022
Continuation Payment will be reduced to $34 million.
The foregoing is only a brief description of the material terms of the amendment
to the Collaboration Agreement and does not purport to be a complete description
of its terms and is qualified in its entirety by reference to the amendment,
which will be filed as an exhibit to Arcus's Annual Report on Form 10-K for the
year ending December 31, 2021.
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